A Critical Analysis of the Protection of Stakeholders’ Interests under the South African Companies Act: (Part 1)

Abstract

Traditional company law enabled companies to embark on the ‘shareholder value oriented approach,’ the main focus being on the owners of equity. In terms of this shareholder value approach, the interests of the shareholders are paramount and interests of other stakeholders are considered only if their advancement will lead to shareholder value maximization, that is, ‘through the prism of shareholder profit maximization.’ Thus, the emphasis, in accordance with traditional company law, has been on the role of directors in managing and overseeing the company’s business primarily for the benefit of the shareholders. Most of the checks and balances on the powers of the directors were aimed at considering, primarily one interest group, namely shareholders of the company. There has, however, been a shift in public opinion towards the recognition of a variety of interests that should be considered wider than only those of the shareholders. The wider variety of interests includes environmental concerns and the interests of stakeholders such as employees, suppliers, consumers and the community. This paper provides a critical analysis of the protection of stakeholders’ interests under the Companies Act, 2008. The main concern is whether the Companies Act adequately protects the interests of stakeholders. The paper concludes that even though efforts has been made in the Companies Act 2008 to ensure that other stakeholders, apart from just shareholders are protected, it seems that legislation is far from effectively providing for the rights of stakeholders. In this regard, recommendations for law reform are made

DOI: 10.5901/mjss.2014.v5n3p61